Short-Term vs. Long-Term Rentals: Which One Makes More Sense in Los Cabos?
Los Cabos has established itself as one of Mexico’s premier real estate markets, attracting investors, vacationers, and expatriates alike. Its stunning beaches, world-class golf courses, and vibrant nightlife make it a desirable destination for tourists, while its growing economy and infrastructure improvements appeal to long-term residents.
Real estate investment opportunities in Los Cabos have surged in recent years, fueled by a booming tourism sector and an influx of foreign buyers. Investors often find themselves choosing between two rental strategies: short-term vacation rentals and long-term leases. Each has its own advantages and drawbacks, depending on investment goals, risk tolerance, and property management preferences. This blog explores both options in-depth to help you determine the best approach for your Los Cabos investment.
Short-Term Rentals Analysis
Definition and Characteristics
Short-term rentals (STRs) refer to properties rented out for brief stays, typically ranging from a few days to several weeks. These properties are commonly listed on platforms such as Airbnb and VRBO, catering to tourists seeking a temporary home away from home.
Peak Season Rates and Occupancy Patterns
Los Cabos experiences a high tourist influx from November through April, with peak seasons around major holidays and events like spring break and fishing tournaments. During this time, STRs command premium rates, often significantly higher than long-term rental prices.
Target Market
- Vacationers and tourists
- Business travelers
- Digital nomads
- Seasonal visitors and snowbirds
Platforms and Marketing Strategies
To maximize visibility and occupancy, STR owners list properties on online travel platforms such as:
- Airbnb, VRBO, Booking.com – Popular platforms for vacation rentals
- Social Media & Direct Booking Websites – Engaging travelers through targeted advertising and direct reservations
- Local Partnerships – Working with travel agencies and event organizers to drive bookings
Maintenance and Management Requirements
Short-term rentals require frequent maintenance and hands-on management due to high turnover. Common needs include:
- Housekeeping and restocking between guests
- Regular repairs and inspections
- Guest communication and check-in/check-out coordination
- Compliance with local regulations and HOA rules
ROI Calculations and Profit Potential
Los Cabos STRs can generate substantial income, particularly during peak seasons. However, profitability depends on factors such as location, property type, and occupancy rates. High-end beachfront villas can command nightly rates of $500-$1,500, while standard condos range from $150-$400 per night. Annual gross revenue potential varies, but well-managed STRs often yield 20-30% higher returns than long-term rentals.
Legal Considerations and Permits
Investors must comply with local rental regulations, which may include:
- Tourist rental permits
- HOA rules and restrictions
- Tax obligations for rental income
- Compliance with noise and zoning laws
Pros and Cons
Pros:
✔ Higher income potential ✔ Flexibility to use the property personally ✔ Opportunity to adjust rental rates based on demand
Cons:
✘ Higher maintenance and operational costs ✘ Requires constant guest management ✘ Regulatory uncertainties
Long-Term Rentals Analysis
Definition and Typical Lease Terms
Long-term rentals (LTRs) are properties leased for extended periods, typically six months to several years. These rentals cater to residents who require stable housing and are less affected by seasonal tourism trends.
Current Market Rates in Los Cabos
Rental rates vary by location:
- Luxury beachfront condos (Palmilla, Pedregal): $2,500-$6,000/month
- Downtown Cabo & San José del Cabo apartments: $1,200-$2,500/month
- Suburban and expat-friendly areas (El Tezal, Club Campestre): $800-$2,000/month
Target Market
- Expats relocating to Los Cabos
- Local professionals and business owners
- Retirees seeking a peaceful lifestyle
Tenant Screening and Management
Long-term tenants require thorough screening to ensure reliability. Property owners should:
- Verify employment and income stability
- Check rental history and references
- Draft comprehensive lease agreements to protect their investment
Maintenance Responsibilities
Compared to STRs, long-term rentals have lower maintenance demands, but landlords must still handle:
- Periodic inspections
- Major repairs (roofing, plumbing, HVAC systems)
- Legal obligations related to tenant rights
Steady Income Potential
While LTRs yield lower monthly rental income than STRs, they provide consistent cash flow without the unpredictability of seasonal fluctuations.
Legal Framework and Tenant Rights
- Mexican rental laws protect tenant rights, making eviction processes more complex
- Landlords must register rental income for tax purposes
- Security deposits and lease contracts must comply with local laws
Pros and Cons
Pros:
✔ Reliable, steady income ✔ Lower management and maintenance needs ✔ Less regulatory risk than STRs
Cons:
✘ Lower income potential compared to STRs ✘ Longer eviction processes if tenants default ✘ Less flexibility to use the property
Market-Specific Factors to Consider
- Location Matters: High-demand tourist areas (Medano Beach, Palmilla) favor STRs, while residential zones (El Tezal, San José del Cabo) suit LTRs.
- HOA Regulations: Some communities restrict STRs, favoring long-term leases.
- Personal Investment Goals: If seeking immediate returns, STRs may be better; for passive income with lower effort, LTRs offer stability.
Conclusion: Which Strategy Is Right for You?
Both short-term and long-term rentals present viable opportunities in Los Cabos, depending on your investment goals. Short-term rentals offer higher revenue potential but require active management and regulatory navigation, while long-term rentals provide steady income with lower involvement. Investors should carefully assess their risk tolerance, management capacity, and financial objectives before choosing the best strategy. For personalized insights and expert guidance, working with a trusted real estate agency in Los Cabos can help maximize returns and streamline the investment process.
